Business

Sri Lanka Development Update 2021 – World Bank Report

Published

5 years ago

2021/04/28

(Select extracts)

Amid the COVID-19 pandemic, Sri Lanka’s economy contracted by 3.6 per cent in 2020, the worst growth performance on record, as is the case in many countries fighting the pandemic. Swift measures enacted by the government in the second quarter helped contain the first wave of COVID-19 successfully, but these measures hit sectors like tourism, construction, and transport especially hard, while collapsing global demand impacted the textile industry.

Job and earning losses disrupted private consumption and uncertainty impeded investment. As a result, the economy contracted by 16.4 per cent (y-o-y) in the second quarter. The economy began to recover in the third quarter as the first wave was brought under control and containment measures were relaxed. The momentum continued in the fourth quarter as the economy was broadly kept open despite a second wave of COVID-19 infections.

The government took proactive measures to mitigate the impact of the pandemic. Despite limited fiscal space, resources were allocated (approximately 0.7 per cent of GDP) for health measures, cash transfers, and postponed tax payments. While public expenditures increased, revenues declined, resulting in a widening of the fiscal deficit in 2020. Due to the economic contraction and the elevated fiscal deficit amid COVID-19, public and publicly guaranteed debt is estimated to have increased to 109.7 percent of GDP. In line with the government strategy to reduce external debt over the medi- um-term, debt financing relied increasingly on domestic sources.

The Central Bank of Sri Lanka (CBSL) significantly contributed to the crisis response. It undertook considerable monetary policy easing, for which there was room given benign inflation, and additional measures to increase liquidity in the market and support businesses. It also introduced financial sector regulatory measures, like a debt moratorium for COVID-19 affected businesses and individuals.

However, despite these efforts, bank lending to the private sector remained low. By contrast, credit to the government and state-owned enterprises surged and accounted for 80 per cent of the total credit in 2020.

The pandemic likely exacerbated pre-existing financial sector vulnerabilities, although the full impact of COVID-19 cannot yet be observed. An improved trade balance and strong remittance inflows narrowed the current account deficit. A sharp drop in imports in 2020 more than offset the decline in exports. However, with financial inflows insufficient to meet external liabilities, reserves declined to an 11-year low in February 2021, before a currency swap worth US$ 1.5 billion with the People’s Bank of China was approved in March 2021. Due to a shortage of foreign currency, the exchange rate depreciated by 6.5 per cent from January through March 17, 2021.

The CBSL took several measures to preserve foreign exchange reserves and reduce pressures on the exchange rate. Growth is expected to recover to 3.4 per cent in 2021, mainly reflecting a base effect and FDI inflows. Gradually normalizing tourism and other economic activities as well as already signed investments will support growth. However, the subdued global recovery may dampen export demand. Over the medium-term, continued trade restrictions, economic scarring from the slowdown and the high debt burden may weigh on growth prospects.

Through an enhanced focus on an export-oriented growth model that taps the full potential of private investment, the country could realize its ambitions to increase its competitiveness and raise growth in a sustainable manner. The forecast is subject to both upside and downside risks. If the global economy recovers faster than expected and the global tourism industry rebounds more quickly with the progress on vaccination programs, the growth outlook could become more favorable.

On the other hand, downward risks persist, pertaining to debt and external sustainability given high debt and low external buffers, especially because the repayment profile requires accessing financial markets frequently. Given large refinancing requirements, constrained market access amid rating downgrades is a challenge. Thus, striking a balance between supporting the economy amid COVID-19 and ensuring fiscal sustainability is key. A reform program to provide a fiscal anchor could help Sri Lanka to reduce debt vulnerabilities and lower sovereign risk.

The COVID-19 impact on employment and poverty

The economic contraction in the wake of COVID-19 has reversed past progress, at least temporarily. Poverty is expected to have risen since the onset of the pandemic mostly due to widespread job and earning losses. Simulations suggest that job losses were more likely to occur in urban areas and among private sector and own-account workers. Job losses were concentrated in the lower-middle of the income distribution: workers most vulnerable to job loss are located between the 20th and 40th percentiles of the pre-pandemic earnings distribution.

Temporary absence from work and job losses occurred less frequently than declines in earnings. While informal workers are more likely to suffer earnings losses, formal workers have been affected as well, for example in the export-oriented apparel industry. With jobs lost and earnings reduced, the $3.20 poverty rate is projected to have increased from 9.2 per cent in 2019 to 11.7 per cent in 2020.

The poorest experienced the largest proportionate earnings shock while the smallest proportionate income losses were suffered by the richest. The latter tend to have formal, secure jobs and better access to digital technology that allows them to conduct wage work or business operations remotely. To mitigate the impact of the economic hardship on the poor and vulnerable, the government implemented several livelihood support programs, which helped to soften the labor market shock and the impact on poverty.

Further progress in restoring livelihoods and making them more resilient could help Sri Lanka to continue its path of poverty reduction and shared prosperity. The current social protection system could support the reintegration of those who lost their jobs. In the medium term, social safety nets could be better targeted toward the poor and vulnerable, and adjusted to allow for support to be scaled up quickly and effectively in times of crises. Unequal opportunities to work from home have introduced new economic and spatial divides as working remotely is nearly exclusively an option for high income earners, and small and medium-sized enterprises were unlikely to adopt digital technologies.

In the medium to long-term, digital technologies could become an important engine for job growth. However, despite wide scale ownership of cellphones in Sri Lanka, the digital revolution will fall short of expectations without expansion of high-speed networks and accessible data on the whole island. Sri Lanka could provide new opportunities for economic mobility through policies that expand or universalize access to digital infrastructure.

Investments in digital literacy are a prerequisite for widely shared benefits from these new opportunities.

Growth should recover gradually in 2021. The economy is expected to grow by 3.4 per cent in 2021, from a low base, as vaccination programs progress in Sri Lanka and its major trading partners.

Already-signed investments into the Colombo Port City and Hambantota Industrial Zone and gradually normalizing domestic economic activities should provide an impetus to growth. However, the momentum of the recovery is expected to be constrained due to: (i) subdued export demand and tourism, as well as lower remittances growth amidst the sluggish global recovery; and (ii) the challenging domestic macroeconomic situation. Continued import restrictions and the high debt bur- den will adversely affect growth and poverty reduction over the medium-term. Inflationary pressure is expected to materialize in 2021-2023 due to the partial monetization of large fiscal deficits. External buffers are expected to remain low, with subdued financial inflows and significant financing needs. The current account deficit is projected to remain low in 2021, with strict import restrictions largely offsetting relatively low garment exports and tourism receipts.

Courtesy – Sri Lanka

Financial Chronicle

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Business

Historic launch of CCWE Fashion Week & International Summit 2026

Published

22 hours ago

2026/05/22

Thilina Walpola

Ayanthi Gurusinghe, President, Ceylon Chamber of Women Entrepreneurs (CCWE), joined by Damith Pallewatte, MD/CEO, HNB, and Sanjay Wijemanne, Senior Executive Vice President/COO, HNB, at the press conference announcing CCWE Fashion Week, powered by HNB, held at HNB Towers.

The Ceylon Chamber of Women Entrepreneurs (CCWE) officially announced the CCWE Fashion Week & International Summit 2026 at a press conference held in Colombo, unveiling a historic national initiative that will mark the first-ever fashion week in Sri Lanka and the South Asian region dedicated exclusively to women entrepreneurs.

Held under the theme “Threads of Inclusion Woven from Every Walk of Life,” the event is scheduled to take place from 16th to 20th July 2026 at Cinnamon Life, Colombo, positioning Sri Lanka at the forefront of inclusive and sustainable fashion while creating a powerful platform for economic and social transformation.

This landmark initiative goes beyond fashion to deliver meaningful value to society by empowering women entrepreneurs across diverse communities, industries, and regions. By bringing together designers, artisans, SMEs, policymakers, investors, and international stakeholders, the event aims to create new market opportunities, strengthen financial inclusion, and promote sustainable livelihoods. It will serve as a catalyst for economic growth by supporting women-led businesses, enhancing export potential, encouraging youth participation in creative industries, and fostering regional collaboration across South Asia.

Supported by a strong network of corporate partners, the initiative is led by HNB as the Title Sponsor, reflecting a collective commitment to empowering women economically and driving more inclusive national progress.

Speaking at the press conference, Dr. Ayanthi Gurusinghe, President of CCWE and Chairman of the Fashion Week, stated, “Today we are announcing more than an event—we are introducing a national movement that will transform the way we view women entrepreneurs in Sri Lanka. This platform is designed to open doors for women from every walk of life, enabling them to convert talent into enterprise, gain access to markets, and contribute meaningfully to the economy. Through this initiative, Sri Lanka has the opportunity to lead the region in building a future where inclusion meets opportunity and equality.”

HNB, MD/ CEO, Damith Pallewatte, added, “For over 135 years, HNB has stood as a partner in progress to all Sri Lankans, and supporting women entrepreneurs is central to how we continue that legacy. This initiative creates a platform where women can access markets, build sustainable businesses, and contribute meaningfully to national economic development.

When women are empowered with the right access and support, the impact extends to families, communities, and the broader economy. Our decision to serve as Title Sponsor is driven by our commitment to enabling that access and supporting pathways for long-term growth through financial inclusion and enterprise development.”

Extending regional support, Mrs. Premila Acharya, President of the South Asian Women Development Forum (SAWDF), shared her support online, “The CCWE Fashion Week & International Summit 2026 is a landmark initiative that reflects the strength and potential of women entrepreneurs across our region. It is inspiring to see Sri Lanka take the lead in creating a platform where inclusion, opportunity, and equality come together. SAWDF is proud to stand in partnership with CCWE in empowering women through collaboration and shared progress.”

Highlighting achievements The United Nations Economic and Social Commission for Asia and the Pacific Subregional Office for South and South-West (ESCAP-SSWA) as Knowledge Partner Ms. Mikiko Tanaka, Head and Director noted “ESCAP is pleased to serve as a knowledge partner for the CCWE Fashion Week & International Summit 2026. This initiative reflects our shared commitment to enhance women entrepreneurs’ access to markets, finance and digital networks. Connecting women-led businesses to regional networks can further unlock opportunities outside Sri Lanka. We commend CCWE’s leadership in creating an enabling environment for women from diverse backgrounds to innovate, participate and contribute to inclusive and sustainable economic development.”

Business

Sri Lanka’s capital market gains international recognition for GSS+ Bond issuances

Published

22 hours ago

2026/05/22

Thilina Walpola

The Colombo Stock Exchange (CSE) announces that Sri Lanka’s capital market has received international recognition for the quality and innovation of its Green, Social, Sustainability and Sustainability-Linked (GSS+) bond issuances at the 2026 Sustainable Debt Awards hosted by Environmental Finance. This milestone reflects the continued strengthening of Sri Lanka’s sustainable finance landscape and its growing alignment with international capital markets.

This achievement builds on a sustained collaboration with the EU-funded Green Recovery Facility, implemented by Expertise France, which has supported the development and international positioning of Sri Lanka’s GSS+ bond market. Advisory and coordination support has been provided in close collaboration with the CSE, alongside technical inputs from the contracted consultancy team Baastel led by Jason Taylor.

Since supporting the operationalisation of Sri Lanka’s Green Bond Framework in 2023, this engagement has evolved into a broader effort to develop the country’s GSS+ bond market. Through strengthened policy alignment, market development, and stakeholder engagement, this partnership has contributed to corporate GSS+ bond issuances aligned with international standards.

Collectively, recent GSS+ bond issuances in Sri Lanka have mobilised approximately LKR 82 billion (around EUR 216 million) across green, blue, social, sustainability, and sustainability-linked instruments, financing priority sectors such as renewable energy, energy efficiency, water and coastal resilience, and inclusive social infrastructure. These issuances have been oversubscribed, reflecting growing investor confidence in Sri Lanka’s sustainable finance framework.

This progress has been supported by the introduction of Sri Lanka’s GSS+ Bonds Regulatory Framework in 2025, aligned with international principles, further strengthening market credibility and investor confidence.

The awards recognise the following Sri Lankan institutions:

DFCC Bank – Award for Innovation: Use of Proceeds (Green Bond, APAC)

Bank of Ceylon – Award for Innovation: Sustainability Bond Structure (APAC)

Commercial Bank of Ceylon – Green Bond of the Year (Financial Institution, APAC)

Thimal Perera, Director/Chief Executive Officer, DFCC Bank PLC said, “This recognition reflects the progress Sri Lanka’s capital markets are making in aligning with international sustainable finance standards and strengthening credibility with global investors. We are honoured to receive recognition in the area of innovation in use of proceeds, which highlights the growing ability of Sri Lankan institutions to structure financing solutions with transparency, measurable impact, and long-term relevance. We remain grateful to the regulators, market participants, technical partners, and investors whose continued support is helping advance Sri Lanka’s sustainable finance ecosystem.”

“We are honoured to receive the Environmental Finance’s Sustainable Debt Award for Innovation – Sustainability Bond Structure (APAC) for the Bank of Ceylon’s inaugural LKR 20 billion Basel III compliant Tier 2 Sustainability Bond – the largest sustainability bond issuance in Sri Lanka and the first of its kind. This alignment addressed both BOC’s capital adequacy requirements and commitment to aligning sustainable finance with national development priorities while advancing resilient and inclusive economic growth in Sri Lanka. As the first Sri Lankan bank to secure this prestigious global award, we wish to thank the Colombo Stock Exchange for their proactive coordination and encouragement. We also extend our sincere appreciation to all stakeholders who partnered with us in this trailblazing endeavor.” said Mr. G. A. Jayashantha, Acting Senior Deputy General Manager/ Head of Global Markets, Bank of Ceylon.

Remarking upon the award Sanath Manatunge, Managing Director / Chief Executive Officer of Commercial Bank of Ceylon said “Winning the ‘Green Bond of the Year’ award is a significant milestone for Commercial Bank and a strong endorsement of our commitment to sustainable finance and responsible banking. As the largest private bank in Sri Lanka, we recognise our responsibility to support investments that drive long-term environmental and economic resilience, particularly in the renewable energy sector. This recognition reflects the Bank’s strategic focus on advancing sustainable financing solutions that contribute meaningfully to the country’s climate goals and broader sustainable development agenda.”

These recognitions are particularly significant in the context of Sri Lanka’s ongoing economic recovery and debt restructuring process. As the country works to restore macroeconomic stability and rebuild investor confidence, the ability of Sri Lankan financial institutions to successfully issue GSS+ bonds aligned with rigorous international standards sends a strong signal to global capital markets.

Business

Uber introduces Hybrid Subscriptions for Moto and Tuk Drivers

Published

23 hours ago

2026/05/22

Thilina Walpola

Uber, Sri Lanka’s most loved ridesharing platform, today announced the launch of Hybrid Subscriptions for Moto and Tuk drivers in the country. This includes a new ‘earn first, pay later’ model that gives drivers greater flexibility by allowing them to start earning on the platform without upfront payments. Drivers will continue to benefit from 0% commission on trips, allowing them to keep all of their earnings while paying a subscription fee separately.

With hybrid subscriptions, drivers can choose a model that works best for their driving patterns, making it easier for both full-time and part-time drivers to access trips and earn on Uber. The launch is aimed at improving the overall experience for drivers while continuing to offer reliable mobility for riders.

Flexibility and earning potential remain key priorities for drivers across Sri Lanka’s two- and three-wheeler ecosystem. The new model addresses this by giving drivers more control over how they engage with the platform and how they structure their earnings. By offering both time-based and earning-based subscription options, Uber provides drivers greater flexibility. While time-based subscriptions are ideal for full-time drivers, earning-based subscriptions work well for part-time drivers.

Commenting on the launch, Kaushalya Gunaratne, Country Manager – Mobility, Uber Sri Lanka, said, “”Drivers are at the heart of everything we do. We were among the first to introduce subscription models for Moto and Tuk drivers in Sri Lanka, and with hybrid subscriptions, we’re taking it further – giving drivers the benefits of zero commissions and the flexibility to choose what works best for them.”